What’s Installed For Proteome Sciences plc (AIM:PRM)?
Proteome Sciences plc (AIM:PRM), a GBP£10.70M small-cap, is a healthcare company operating in an industry, which faces key trends such as rising demand fuelled by an aging population and the growing prevalence of chronic diseases. Healthcare analysts are forecasting for the entire industry, the bottom line growth to double in the upcoming year , and a whopping triple-digit earnings growth over the next couple of years. Not surprisingly, this rate is more than double the growth rate of the UK stock market as a whole. Today, I will analyse the industry outlook, and also determine whether PRM is a laggard or leader relative to its healthcare sector peers. See our latest analysis for PRM
What’s the catalyst for PRM’s sector growth?
Companies operating in the life sciences sector are confronted with ways to improve R&D productivity, increase the efficiency of its operations, rationalise spending on sales and marketing and enhance financial performance. In the past year, the industry delivered negative growth of -77.72%, underperforming the UK market growth of 11.99%. PRM lags the pack with its sustained negative earnings over the past couple of years. The company’s outlook seems uncertain, with a lack of analyst coverage, which doesn’t boost our confidence in the stock. This lack of growth and transparency means PRM may be trading cheaper than its peers.
Is PRM and the sector relatively cheap?
The life sciences industry is trading at a PE ratio of 42x, above the broader UK stock market PE of 18x. This means the industry, on average, is relatively overvalued compared to the wider market. However, the industry returned a lower 8.46% compared to the market’s 12.78%, which may be indicative of past headwinds. Since PRM’s earnings doesn’t seem to reflect its true value, its PE ratio isn’t very useful. A loose alternative to gauge PRM’s value is to assume the stock should be relatively in-line with its industry.
What this means for you:
Are you a shareholder? PRM recently delivered an industry-beating growth rate in earnings, which is a positive for shareholders. If you’re bullish on the stock and well-diversified by industry, you may decide to hold onto PRM as part of your portfolio. However, if you’re relatively concentrated in life sciences, you may want to value PRM based on its cash flows to determine if it is overpriced based on its current growth outlook.
Are you a potential investor? If PRM has been on your watchlist for a while, now may be the time to enter into the stock, if you like its ability to deliver growth and are not highly concentrated in the life sciences industry. Before you make a decision on the stock, take a look at PRM’s cash flows and assess whether the stock is trading at a fair price.
For a deeper dive into Proteome Sciences’s stock, take a look at the company’s latest free analysis report to find out more on its financial health and other fundamentals. Interested in other healthcare stocks instead? Use our free playform to see my list of over 1000 other healthcare companies trading on the market.
To help readers see pass the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned.
